Under Armour Future Endorsement Pipeline Looks Promising

| About: Under Armour, (UA)

Summary

Super Bowl 50 will feature Under Armour QB Cam Newton continuing the company's incredible endorsement success.

Under Armour is executing its Grassroots Basketball Strategy with UA Association to grow its future Basketball endorsement Pipeline.

Individual player endorsements continue to be the focus of industry.

Superbowl 50 will feature breakout NFL QB and Under Armour (NYSE:UA) sponsored Cam Newton, continuing the company's endorsement hot streak. The Carolina Panthers have been the story of the NFL this year as Under Armour scores another winner with Cam Newton.

2015 was an incredible year for UA with Steph Curry and Jordan Spieth's breakout performances. Under Armour is continuing this momentum right into 2016 with the Golden State Warriors looking for back-to-back titles, and Jordan Spieth winning the first golf tournament of the year in record fashion. Cam Newton has emerged as another key endorsement for UA as he led the Panthers to a 15-1 regular season record and is a favorite for the MVP award. Cam Newton is a huge win for the company and his relationship with UA has certainly gone a bit under the radar. Newton is a highly marketable athlete, Cam Newton was a star QB at Auburn (an Under Armour Sponsored school) and seamlessly transitioned to the brand after college. It is very common for players to stay in same athletic apparel brands pipeline from a young age.

As individual player endorsements are becoming a more popular route for athletic apparel companies, Adidas let its NBA Jersey deal lapse to focus more on individual endorsers, the battle for future endorsements will play a key role in Under Armour's future success. Right now, the company is dominating in this arena. So much so that Adidas (OTCQX:ADDYY) has just announced it was replacing in its longtime CEO Herbert Hainer for Kasper Rorsted. Shares of ADDYY were up over 10% after the announcement.

UA Association = Future Endorsement Pipeline

The key to finding key future endorsers is to start at the youth level. While Under Armour sponsors just a handful of NBA players, it is sure to change with its UA Association. The company has gained a significant grassroots basketball presence with its Under Armour Association in the last 3 years. UA has recently announced a Steph Curry AAU team in the Bay Area, instantly making it one of the most sought-after teams in the country.

UA Association is now considered on the same talent level if not better than Nike's Grassroots circuit EYBL. Just like how Cam Newton transitioned from a UA college to a UA endorser, this is an increasing trend in the basketball world as well. This is what makes a company's grassroots presence so important; what company Top Youth AAU players play on often determines what college they go to. Nike (NYSE:NKE) players often go to Nike schools etc. Players often stay in the same pipeline all the way up to pros. UA already has some of the highest regarded players in the country in its AAU pipeline, including 7-1 Thon Maker, #1 PG recruit Trevon Duval, and Josh Jackson who has been regarded as the next LeBron James. The battle for the basketball shoe market is critical to the future success of Under Armour.

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While Nike continues to dominate this market, UA getting in at the grassroots level aims to disrupt Nike's dominance over the long term. Many top players are playing on UA-sponsored teams and will eventually go through the pipeline to become eventual UA endorsers. Adidas' current strategy is to diversify its sponsorships to as many players as possible and see what hits. Nike is sticking with the Blue Chip level endorsements, which can see it losing out on an underdog Curry type endorser. While UA's current basketball roster is very thin, Curry leading as their flagship player will help bring in the future pipeline of endorsers under him, solidifying the company's presence in the NBA for the long term.

Amid current market turmoil, Under Armour stock has dropped over 24% over the last 3 months. The company begins to look attractive at current levels, as the fundamentals have not changed and footwear sales continue to appear strong for the company, up 61% Y/Y in Q3 due to Steph Curry shoe sales. The company will release its Q4 earnings before market open January 28th. Under Armour is a buy for the long term, and its endorsement success proves that the company will remain relevant in sports for the long haul, not just a current trend.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in UA over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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